Why Apple's bringing the Mac back to the US

Outsourcing things ain't what they used to be

Eagle-eyed Apple watchers have spotted something interesting on the latest iMacs: instead of the usual designed in California, assembled in China label, these Macs were assembled in the USA.

Tonight, Tim Cook will make it official: in an interview airing tonight on NBC, he's going to announce that one of the existing Mac lines will be manufactured in the US from next year, with Apple investing over $100 million in the project.

Apple's dipping its toe in the water here, and in the long term it's quite possible that more than just one Mac line will end up being made in the USA. Apple isn't doing this out of the goodness of its heart, though. It's doing it out of self-interest.

Outsourcing just isn't as attractive as it used to be.

Bringing it all back home

Apple isn't the only firm bringing assembly work back home: The Atlantic describes how General Electric decided to assemble water heaters in the US instead of outsourcing, enabling it to make the same units more quickly, to higher standards, for less money than if it outsourced the jobs, and other firms are following suit.

The phenomenon has been dubbed "insourcing".

Firms are insourcing for several reasons. Fuel prices are soaring, making shipping more expensive, while in the US a natural gas boom means energy costs are falling.

US workforces are more productive and less unionised than they used to be, while Asian workforces are - quite rightly - demanding better pay and conditions. It makes for great PR, especially when people are experiencing economic hard times. And it also stops your suppliers from nicking all your best ideas.

As the always-perceptive Horace Dediu writes on Asymco.com, "An insidious problem emerges when outsourcing: suppliers tend to become competitors. It happened in the PC industry with Acer vs. Dell. But it's also happening to Apple."

As he points out, it's interesting how Apple's key supplier, Samsung, managed to go from "near zero market share in smartphones to being the largest vendor in two years, a feat that Apple itself could not accomplish."

Apple isn't cutting out subcontractors and setting up its own enormous Mac factories yet - Tim Cook says that "this doesn't mean that Apple will do it ourselves, but we'll be working with people, and we'll be investing our money" - but it's clearly heading down that road, and that sounds like good news to me.

Irrespective of Apple's reasons, the consequences of insourcing are positive: as I wrote earlier this year about Apple's A5 processor being made in Texas,